Loan Syndication “Should Take Higher Priority“ in AfDB Lending Strategy
Loan syndication will have a higher profile in the lending strategy of the African Development Bank (AfDB).
Tim Turner, director of the AfDB’s private sector department, said: “Active resource mobilization through loan syndication needs to be an institutional priority of AfDB, and it is important that the Bank begins to act now.”
Mr Turner made this assessment on 27 October 2011 in Tunis, during the Bank’s Board of Directors Seminar on Loan Syndication and Co-financing. Mr. Turner and Mr. Lorenz Jorgensen, director and head of loan syndications at the European Bank for Reconstruction and Development (EBRD) had made presentations to the Board on various issues on loan syndication from the perspective of their two institutions. The presentations indicated that loan syndication would not only enhance AfDB’s private sector resource mobilization but also facilitate foreign direct investment in Africa by providing new international financial leverage that can make large transactions financeable.
Mr. Turner underlined the point that, while there is no crystal ball on how the current difficult global financial situation will evolve, loan syndication could become a strong catalyst for private sector-driven change. He emphasized the need for the Bank to take advantage of the partnership momentum already put in place by the private sector department and the EBRD. Mr Turner further explained that, over the next six months, the AfDB and EBRD would be co-working on a case-by-case basis in order to establish reliable structures to make them lenders of record among possible groups of lenders in a syndicated loan.
The seminar reviewed the AfDB’s experience in co-financing, modalities for risk-sharing, particularly for A/B loans, the challenges of preferred creditor status, and Basel III 2019 requirements.
In his conclusion, Vice President Aloysius Ordu noted that, during difficult market conditions, the Bank must adapt. He expressed satisfaction that, from the questions and responses, the issues were well understood. The AfDB’s general counsel, Mr. Gadio, outlined two key constitutional dispositions which cover the Bank in establishing future co-financing arrangements through syndication.